Co-founder Matthew Gertner emailed Liz Gannes with this response to her query:

Basically our investors had certain expectations in terms of user base growth. We were very happy with the adoption of the product but they weren’t. When we ran out of cash they weren’t willing to provide additional funding, so we have no choice but to shut the service down.

The source code for our client is already open source, and we’re planning to put it up on an independent site like SourceForge or Google Code in case it can be of use to others. We’re still deciding what to do with the server code, but there’s a good chance that we’ll decide to open source that as well.

AllPeers was backed by Index Ventures. I expect to see a brutal shakeout in this particular sector of the file-sharing business. The good news (if you can call it that) is that the AllPeers blog, “Peer Pressure,” is going to stay in business. I have enjoyed Matthew and Cedric’s writings and am glad to hear that they will still be sharing their viewpoints on everything from the web to P2P to startup life.